Correlation Between Adagene and Wesana Health

Can any of the company-specific risk be diversified away by investing in both Adagene and Wesana Health at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Adagene and Wesana Health into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Adagene and Wesana Health Holdings, you can compare the effects of market volatilities on Adagene and Wesana Health and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Adagene with a short position of Wesana Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adagene and Wesana Health.

Diversification Opportunities for Adagene and Wesana Health

-0.13

Correlation Coefficient

Adagene  Wesana Health

Good diversification

The 3 months correlation between Adagene and Wesana is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Wesana Health Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wesana Health Holdings and Adagene is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Adagene are associated (or correlated) with Wesana Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wesana Health Holdings has no effect on the direction of Adagene i.e., Adagene and Wesana Health go up and down completely randomly.

Pair Corralation between Adagene and Wesana Health

Given the investment horizon of 90 days Adagene is expected to generate 17.01 times less return on investment than Wesana Health. But when comparing it to its historical volatility, Adagene is 6.55 times less risky than Wesana Health. It trades about 0.05 of its potential returns per unit of risk. Wesana Health Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  3.15  in Wesana Health Holdings on September 12, 2024 and sell it today you would lose (1.92) from holding Wesana Health Holdings or give up 60.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Adagene  vs.  Wesana Health Holdings

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adagene is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Wesana Health Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Adagene and Wesana Health

The main advantage of trading using opposite Adagene and Wesana Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adagene position performs unexpectedly, Wesana Health can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Wesana Health will offset losses from the drop in Wesana Health's long position.

The idea behind Adagene and Wesana Health Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.